With UK tenants paying £51.6bn ($72.5bn) in rent in 2017 – a rise of 128% since 2007 – challenger banks should start to implement rent recognition strategies to maximise growth opportunities in the UK mortgage market.

At present, the rent payments of UK tenants are not taken into account by credit reference agencies. With house prices high relative to income levels, stricter lending criteria, and consumers struggling to amass the sizeable deposits required for mortgage approval, the government launched the Rent Recognition Challenge in its 2017 Autumn Budget.

The challenge offered £2m to entrepreneurs “who can develop an application that will record and share [tenants’] rent payment data, helping to improve their credit scores and their chances of getting a mortgage”.

Given that near-term prospects for wage growth are expected to be flat or minimal, house prices are set to remain high, and lending criteria is unlikely to be relaxed, the picture for many aspiring homeowners is far from ideal.

Two digital challenger banks, Monzo and Starling Bank, have recognised the opportunity to service this currently underserved segment by integrating their banking platforms with CreditLadder via the Open Banking compliant APIs.

CreditLadder reads users’ monthly rent payments and then passes the data on to Experian, a leading credit reference agency.

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In doing so, customers are able to boost their credit rating much faster because CreditLadder enables them to have their biggest single outgoing captured in their credit history.

For banks seeking to build relationships with aspiring mortgage holders, offering services such as this could be an excellent way to cement existing relationships and acquire new customers. Challenger banks in particular must offer useful, unique propositions if they are to grow their customer base.